Buy-to-let Mortgage and Family Members

bobbyzzz_2

Hi, if a buy-to-let property was let out on a non-commercial let, say parents letting it out to their daughter, whereby making no profit on the property.

If the intention - letting to a family member - was brought earlier to the attention of the Conveyancing Solicitor who reminded the borrowers that this would be against the mortgage t & c's. And, subsequently was assured that the property would'nt be let out to a relation.

And, if the mortgage agreement offer stated that the property will be occupied by non-related persons as declared on the application and that the borrowers rights under mortgage regulation could be affected if not correct.

What can the mortgage company do if they found out that the borrowers were in violation of the agreement, t&c's, and were also previously warned about it?

kingstreet

A BTL set up as a commercial transaction gives the borrower no rights under financial regulation. At the outset, the question is asked of the borrower, "Will 40% of the property be let to a relative or family member?" and obviously the answer should be yes, if that's the case.

Under those circumstances, the sale becomes regulated, with the borrower having access to the full range of consumer protection measures.

As to what the lender can do about it, that's a tough one. Obviously, the range of sanctions runs from do nothing, through to making an allegation of fraud, or obtaining money by deception. What is the lender likely to do? I suspect nothing, other than a letter which reminds the borrower of the lack of consumer protection.

Assuming this is a real case was there some reason they chose to hide this from the lender and solicitor?

powerwin

Hi. I have no legal expertise, so the following is a complete guess, take with a pinch of sale ... but ... I would say if the borrower has broken specific terms and conditions of the mortgage loan agreement, of which they were fully aware, it would entitle the mortgage lender to take action against the borrower if they wanted to. Actions open to them would be insisting that the family member at the property was removed and replaced by a non-family tenant, or perhaps if they wanted to, they could decide to call in the loan.

Like I say this is a complete guess ... I'm sure someone more experienced will comment.

What are you worried might happen?

Rgds

silvercar

Actions open to them would be insisting that the family member at the property was removed

Insist? They could try but the borrower could only evict the tenant by following the appropriate landlord tenant laws, so the tenant would have a minimum of 6 months in the property.

perhaps if they wanted to, they could decide to call in the loan.

They could do this as the borrower has breached the terms of the loan. This would involve going to court if the borrower didn't comply. Never known a lender taking a mortgagee to court who has kept up with repayments as opposed to one who has arrears. Can't imagine the lender saying to the judge that the grounds for repossession (for that it what it would be) are that the borrower has allowed an unapproved person to occupy and the mortgage payments are up to date.

It is obtaining money by deception ie fraud, so the lender could try and bring criminal charges against the borrower, though I doubt the lender could justify that action.

powerwin

OK, thanks ...

Thrugelmir

bobbyzzz wrote: »

And, if the mortgage agreement offer stated that the property will be occupied by non-related persons as declared on the application and that the borrowers rights under mortgage regulation could be affected if not correct.

What "rights" are you refering to?

bobbyzzz_2

Thx all, your comments have been greatly appreciated. thx.